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Strong Earnings from Ford and Boeing Not Enough to Lift Broader Market

Dan Berman

Hot Stock Minute•July 24, 2013

The Dow and S&P 500 closed modestly lower despite a stronger set of earnings reports than yesterday when the Dow hit its 28th all-time high of the year. The Nasdaq was up fractionally for the day. A number of durable goods makers beat estimates and gave encouraging forecasts. Meanwhile, the Commerce Department said new home sales climbed 8.3 percent in June to a seasonally adjusted annual rate of 497,000 units. That's the the highest rate since May 2008, and beat estimates which were for about 484,000. At the same time weekly mortgage rates dropped for the first time in 2 1/2 months.

On the earnings front, Both Ford (F) and Boeing (BA) were revved up today on their reports. Detroit's second largest automaker rose 2.5% on its quarterly results. The company says its Q2 profit rose to 45-cents a share beating expectations of 37-cents. Ford cited strong demand for its pickup trucks in North America and record earnings in parts of Asia. Revenue climbed 15% from a year earlier and topped $36-billion, nearly $1 billion more than estimates.

As for Boeing, its shares initially popped 2% on earnings, touching an all-time high, before the stock retreated and closed down by nearly 1%. Boeing posted earnings of $1.67 excluding items, 9-cents better than estimates. Revenue also climbed higher than expectations hitting $21.8 billion when consensus had been for $20.781 billion. The company credits an increase in deliveries of its 737 and 787 Dreamliner. It is also raising the full-year outlook citing increased business in Asia and Latin America.

Shares of Caterpillar (CAT) fell more than 2% on quarterly earnings. The maker of construction equipment says earnings fell 43%, coming in at $1.45 a share, which missed estimates by a quarter. Revenue also fell short coming in at $14.62 billion when expectations had been for $14.925 billion. Caterpillar says there's less demand for its equipment because the global mining industry has slowed as China's economy has cooled. The company also says falling commodity prices have caused a slowdown in orders.

Pepsi (PEP) dipped 0.5% despite a strong earnings beat. The company posted earnings of $1.31 a share compared to estimates of $1.19. Revenue was also slightly above consensus at $16.807 billion versus $16.789 billion. Pepsi credited its mixed portfolio, citing higher prices for Gatorade, Doritos, Tropicana and Quaker as a factor in the beat. Just last week billionaire investor Nelson Peltz went public with a plan for Pepsi to spin off its snack division and buy competitor Mondelez.

Apple (AAPL) soared 5% in the wake of its earnings which came out after yesterday's closing bell. Apple made $7.47 a share beating estimates of $7.32. Revenue also topped expectations at $35.3 billion versus $35.02 billion. But compare the numbers to last year when earnings were nearly $2 more a share on similar sales. Looking beyond the bottom line, the company says iPhone sales grew more than expected, offsetting a drop in iPad sales. The company has been upgraded to an outperform by BMO Capital Markets.

AT&T (T) shares fell 1% despite breaking a common pattern we've been seeing this earnings season. It missed on earnings but beat on revenue. The company reported yesterday after the closing bell, posting profits of 67-cents a share, a penny under estimates. Revenue however surprised coming in on the north side of $32 billion. Bottom line: revenue benefited from growth in the wireless and enterprise businesses. But profits were hurt by subsidies of smartphones. Shares of AT&T are up an underwhelming 2% so far this year.

Broadcom (BRCM) fell 15% today on top of a 4% drop yesterday. The chipmaker beat earnings estimates with its quarterly report, posting 70-cents a share excluding items. Revenue missed slightly at $2.09 billion. Of more importance, the company lowered guidance for the current period. Prior to today's drop, Broadcom shares were down about 8% year-to-date.

VMWare (VMW) soared 17% after edging past estimates with its quarterly report, posting profits of 79-cents a share on revenue of $1.24 billion. It also upped its guidance for the quarter now underway. Prior to today, shares were down 24% year-to-date largely on a 21% plunge after the company issued its first-quarter results.